The spatial time lag in panel data models

Ji Tao and Jihai Yu ()

Economics Letters, 2012, vol. 117, issue 3, 544-547

Abstract: This paper proposes to include the spatial time lag in empirical applications using spatial panel data models, and also explains why the coefficient of that term can be negative. We provide simple theoretical frameworks to justify the relevance of the spatial time lag to empirical specifications, which can be caused by either partial adjustments or inter-temporal budget constraints. Monte Carlo experiments suggest that omitting a relevant spatial time lag can result in significant biases in regression estimates, while including an irrelevant spatial time lag causes no obvious loss of efficiency.

Keywords: Spatial time lag; Spatial autoregression; Dynamic panels; Expenditures (search for similar items in EconPapers)
JEL-codes: C13 C23 H72 H77 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:117:y:2012:i:3:p:544-547

DOI: 10.1016/j.econlet.2012.07.025

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